Question Details

Henke Co. uses the retail inventory method to estimate 



1.	Ryan Distribution Co. has determined its December 31, 2010 inventory on a FIFO basis at $250,000. Information pertaining to that inventory follows:
Selling price	$255,000
Cost to sell	10,000
Cost to complete	30,000
Ryan records losses that result from applying the lower-of-cost-or-net realizable value rule. At December 31, 2010, the loss that Ryan should recognize is
a.	$0.
b.	$5,000.
c.	$25,000.
d.	$35,000.

	2.	Keen Company's accounting records indicated the following information:
Inventory, 1/1/10	$   600,000
Purchases during 2010	3,000,000
Sales during 2010	3,800,000
A physical inventory taken on December 31, 2010, resulted in an ending inventory of $700,000. Keen's gross profit on sales has remained constant at 25% in recent years. Keen suspects some inventory may have been taken by a new employee. At December 31, 2010, what is the estimated cost of missing inventory?
a.	$50,000.
b.	$150,000.
c.	$200,000.
d.	$250,000.

	3.	Henke Co. uses the retail inventory method to estimate its inventory for interim statement purposes. Data relating to the computation of the inventory at July 31, 2010, are as follows:
	     Cost		    Retail	
Inventory, 2/1/10	$   200,000	$   250,000
Purchases	1,000,000	1,575,000
Markups, net		175,000
Sales		1,750,000
Estimated normal shoplifting losses		20,000
Markdowns, net		110,000
Under the lower-of-cost-or-net realizable value method, Henke's estimated inventory at July 31, 2010 is
a.	$72,000.
b.	$84,000.
c.	$96,000.
d.	$120,000.

 
4.	At December 31, 2010, the following information was available from Kohl Co.'s accounting records:
			    Cost		    Retail	
Inventory, 1/1/10	$147,000	$   203,000
Purchases	833,000	1,155,000
Additional markups			       42,000
Available for sale	$980,000	$1,400,000
Sales for the year totaled $1,050,000. Markdowns amounted to $10,000. Under the lower-of-cost-or-net realizable value method, Kohl's inventory at December 31, 2010 was
a.	$294,000.
b.	$245,000.
c.	$252,000.
d.	$238,000.



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